FNM/FRE: Pump, pump, shot, rolls around the rim and

4

rolls around the rim again, and again, and again... While I agree with Buffett that this action to save FNM/FRE was right, I think people are missing the point. People are focusing on the equity markets, when they should be focusing on currencies and the general economy. In the short run the U.S. is still in deep dudu. The stock market rebound is a dead cat bounce. Sell what you want to get rid of into strength, it won't last.

There is still over a half trillion of level three and other assets at risk. Bailing out FNM/FRE doesn't change that. What this action does is allow the air to come out of the bubble slowly. Which is good for avoiding a crash, but not a catalyst to growth.

Most importantly, this should allow the govt the ability to keep people in their homes as this recession plays out. This is a surprisingly populist move for a non-populist govt. And I like that, but don't expect DOW 14,000 again anytime soon. Another year of range bound markets. The opportunities are overseas still, in currencies and maybe commodities if they finish correcting (otherwise those are range bound too).